What are Scope 1, 2 and 3 emissions

Definition

Scope 1, 2 and 3 are the three categories created by the GHG Protocol to classify a company’s greenhouse gas emissions according to where they originate. Scope 1 covers direct emissions from sources the company owns or controls. Scope 2 covers indirect emissions from purchased energy. Scope 3 covers all other indirect emissions that occur across the company’s value chain, both upstream and downstream.

The framework was introduced by the GHG Protocol Corporate Standard, developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). It has become the global default for corporate emissions accounting and is referenced by most major reporting frameworks, including those of the ISSB, the European CSRD, and the U.S. SEC climate disclosure rule.

How each scope works in practice

Scope 1: direct emissions

These come from sources the company owns or operates. Typical examples include fuel burned in company vehicles, natural gas consumed in on-site boilers, diesel used in backup generators, and process emissions from chemical reactions in manufacturing (such as cement clinker production). If the molecule of CO2 leaves a stack or a tailpipe that belongs to the reporting entity, it is Scope 1.

Scope 2: purchased energy

Scope 2 accounts for emissions generated at the power plant (or heat facility) that supplies the company’s electricity, steam, heating or cooling. The company does not burn anything itself, but its demand for energy causes emissions elsewhere. The GHG Protocol allows two methods for calculating Scope 2: the location-based method (using average grid emission factors) and the market-based method (using contractual instruments such as energy attribute certificates or power purchase agreements).

Scope 3: the rest of the value chain

Scope 3 is divided into 15 categories, split between upstream and downstream activities. Upstream categories include purchased goods and services, capital goods, fuel and energy-related activities not covered in Scope 1 or 2, transportation and distribution, waste generated in operations, business travel, and employee commuting. Downstream categories include transportation and distribution of sold products, processing of sold products, use of sold products, end-of-life treatment, leased assets, franchises, and investments.

For most companies outside heavy industry, Scope 3 represents the largest share of total emissions. A bank’s Scope 1 and 2 might cover office electricity and a small vehicle fleet, while its Scope 3 (category 15, investments) reflects the emissions of every company in its loan and equity portfolio.

Concrete example

Consider a mid-size food manufacturer that produces packaged snacks. Its Scope 1 includes natural gas burned in ovens and diesel consumed by delivery trucks it owns. Its Scope 2 is the electricity purchased to run production lines, cold storage and office lighting. Its Scope 3 upstream covers the farming of raw ingredients (wheat, palm oil, sugar), packaging materials, and third-party freight. Its Scope 3 downstream includes retailer refrigeration of the final product, consumer disposal of packaging, and emissions from franchised operations if applicable. In a typical food company profile, agricultural supply chain emissions in Scope 3 dwarf everything in Scope 1 and 2 combined.

How it applies in Brazil

Brazil’s primary corporate emissions reporting mechanism is the GHG Protocol Brazil Programme (Programa Brasileiro GHG Protocol), managed by the Fundação Getulio Vargas (FGV) through its Center for Sustainability Studies (GVces). The programme adapts the global GHG Protocol standards to the Brazilian context and maintains the Public Emissions Registry (Registro Público de Emissões), where companies voluntarily publish inventories broken down by Scope 1, 2 and 3.

The programme classifies participants by reporting level: companies that report only Scope 1 and 2 receive a bronze or silver seal, while those that also report at least some Scope 3 categories qualify for a gold seal. Reporting is voluntary for most sectors, but certain regulated industries and publicly listed companies face increasing pressure from the Comissão de Valores Mobiliários (CVM) to disclose climate-related data. CVM Resolution 193 (2023) allows publicly traded companies to publish ISSB-aligned sustainability reports on a voluntary basis (the mandatory requirement was revoked by CVM Resolution 244 of May 2026, and from 2027 companies that do not file must explain why), and the ISSB standards explicitly rely on the Scope 1, 2 and 3 framework.

For Scope 2 calculations in Brazil, the grid emission factor is published annually by the Ministry of Science, Technology and Innovation (MCTI) through the SIN (Sistema Interligado Nacional) data. Companies using the market-based method may rely on I-REC certificates, which are the energy attribute certificate standard commonly traded in the Brazilian market.

The most common mistake

The most frequent error is treating Scope 3 as optional or immaterial. Many companies report only Scope 1 and 2, then present the result as their “total carbon footprint.” This creates a misleading picture. For a retailer, financial institution, or technology company, Scope 1 and 2 may account for less than 10 percent of actual emissions. Omitting Scope 3 does not reduce the footprint; it just hides it.

A related confusion involves double counting. When Company A reports its Scope 1 emissions from manufacturing, and Company B (its customer) reports those same emissions as Scope 3 (purchased goods and services), the same ton of CO2 appears in both inventories. This is by design. The GHG Protocol explicitly states that double counting across scopes and across companies is expected and acceptable, because each scope answers a different management question. Company A controls the combustion; Company B chose the supplier. Both have a lever to pull.

Another common mistake is confusing the location-based and market-based methods for Scope 2. A company that buys renewable energy certificates can report zero Scope 2 under the market-based method, but it still causes the same physical grid demand. The GHG Protocol Scope 2 Guidance requires companies operating in markets with contractual instruments to report both methods (dual reporting), but many companies report only the lower number.

Why the distinction matters for carbon markets

Scope classification directly affects how carbon credits and offsets are used in corporate claims. Under most credible standards (including the Voluntary Carbon Market Integrity Initiative, VCMI), offsets cannot substitute for reducing Scope 1 and 2 emissions. They may complement a reduction strategy, particularly for residual emissions or hard-to-abate Scope 3 categories. A company claiming “carbon neutrality” by purchasing credits while ignoring Scope 3 measurement faces increasing scrutiny from regulators, investors, and rating agencies. The scope framework, in short, is not just an accounting exercise; it determines what counts as a credible climate commitment.

Primary sources: GHG Protocol Corporate Standard, revised edition (WRI/WBCSD, 2004); GHG Protocol Scope 2 Guidance (WRI/WBCSD, 2015); GHG Protocol Corporate Value Chain (Scope 3) Standard (WRI/WBCSD, 2011); Grid emission factors for the Brazilian National Interconnected System (MCTI, 2026); CVM Resolution 193/2023 on ISSB-based sustainability reporting, as amended (CVM, 2023-2026).